Danaos (DAC) Q1 2026 Earnings Call Transcript

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Date

Tuesday, May 12, 2026 at 9 a.m. ET

Call participants

• Chief Executive Officer — John Coustas
• Chief Financial Officer — Evangelos Chatzis

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Takeaways

• Adjusted EPS -- $6.72 per share, increasing from $6.04 per share in Q1 2025.
• Adjusted Net Income -- $122.5 million, up from $113.4 million in Q1 2025.
• Adjusted EBITDA -- $180.6 million, rising 5.2% or $8.9 million from Q1 2025.
• Contracted Revenue Backlog -- $4.1 billion with 4.2-year average charter duration; $120 million was added since the previous earnings release.
• Contract Coverage -- 100% for the remainder of the current year, 88% in 2027, and 65% in 2028, as reported for the containership fleet.
• Cash Position -- $900 million in cash as of period-end; total liquidity including credit facilities and marketable securities reaches €1.3 billion.
• Net Debt -- $170 million as of March 31, 2026, with a net debt to adjusted EBITDA ratio of 0.2x.
• Fleet Orders & Expansion -- Orders placed for four Newcastlemax drybulk vessels (for 2028 delivery) and two 5,000 TEU containerships (for 2027 delivery), both new containerships under three-year charters; pro forma fleet will comprise 104 containerships and 15 Capesize/Newcastlemax vessels.
• Vessel Operating Expenses -- $50 million, down from $51.7 million in Q1 2025; average daily operating cost decreased to $6,680 per vessel from $7,030 year over year.
• G&A Expenses -- $14.6 million, up $2.4 million due to $1.3 million higher management fees and $1.1 million increase in corporate G&A costs.
• Interest Expense -- $10.9 million, up $1.7 million; higher indebtedness by $330 million, partially offset by a 50 basis-point reduction in debt service cost and $2.8 million higher capitalized interest.
• Interest Income -- $7.6 million, up from $3.6 million, mainly due to higher average cash balances.
• Drybulk Spot Market Performance -- $7 million increase in operating revenue, with average time charter equivalent earnings at $24,800 per day, sharply higher than $10,500 per day in Q1 2025.
• Containership Segment Operating Revenue -- Decreased by $6.6 million due to $6.9 million lower contracted rates and $7.2 million reduction from non-cash GAAP revenue recognition, partially offset by $3.9 million in newbuild contributions and $3.6 million from improved fleet utilization.
• Dividend -- $0.90 per share declared for the quarter.
• Share Repurchase Authorization -- $65 million remains under the $300 million program; management is taking a cautious stance on further buybacks while shares are priced at all-time highs.
• Unencumbered Fleet -- 67 of 86 vessels are unencumbered, with an additional 12 vessels used to secure the revolving credit facility also debt-free.
• Drybulk Fleet Scheduled Off-Hire -- Only two Capesize vessels were dry-docked for scheduled maintenance during the quarter; no further scheduled dry-dockings for the drybulk fleet for the remainder of the year.
• Strategic LNG Exposure -- CEO Coustas stated, "the energy sector is, let's say, our next point of focus. And as we see geopolitically, there are a lot of changes in that area. So we are following it very closely, and we try to address it from every angle. Both from the angle of transportation and also from the angle of LNG production itself, which is going to give us an access to the transportation as well."

Summary

Danaos Corporation (NYSE:DAC) reported sequential growth in adjusted earnings, underscored by a significant increase in drybulk time charter equivalent earnings and a prudent expansion of the order book, which will further diversify and scale its fleet. The company’s liquidity position and backlog coverage extend operating visibility and provide capital allocation flexibility as strategic investments in both the containership and drybulk markets advance. Management is sharpening its strategic focus with deliberate moves into the energy sector, particularly LNG, explicitly signaling this area as a developing investment theme. Charter coverage for the containership fleet ensures consistent cash flow, while disciplined expenses and capital structure support the ability to respond to ongoing geopolitical disruptions and trade developments.

• Management emphasized that "practically all of 2026 and 2027 are almost fixed," indicating limited availability for new near- to medium-term charter bookings.
• Fleet expansion aligns with multilateral trade shifts, with management attributing ongoing profitability improvements to these evolving patterns.
• CFO Chatzis cited a "cautious" approach on share repurchases at record share prices, even while reiterating the view that shares are "deeply undervalued."
• The company clarified all Capesize off-hire days for the quarter were attributable to scheduled dry-docking and expects no further drybulk maintenance-related downtime for the rest of the year.

Industry glossary

• Newcastlemax: A drybulk vessel class with approximately 210,000 DWT, optimized for maximum port draft in Newcastle, Australia.
• TEU: Twenty-foot equivalent unit, the standard capacity unit for container ships.

Full Conference Call Transcript

John Coustas: Thank you, Evangelos. Good morning, and thank you all for joining today's call to discuss our results for the 2026. This quarter was shaped by the unprecedented events in The Gulf and the closure of the Strait of Hormuz, a situation that is still unfolding, but which we hope will be resolved in the coming weeks. The disruption has primarily benefited the tanker sector where rates spiked sharply before quickly normalizing. In the container sector, the disruption helped stabilize and lift certain box rates, however, did not have a significant effect. 2 of our vessels currently remain in The Gulf but this does not affect our earnings as both vessels continue to be on charter.

The drybulk market has improved considerably. and continues to strengthen. Our optimistic outlook for this market prompted us to expand our order book to 4 Newcastlemaxes for 2028 delivery. We also ordered 2 5 thousand TEU container ships for 2027 delivery both of which are backed by 3 year charters. Together with charter arrangements for our existing fleet, these additions position us with a pro forma fleet of 104 container ships and 15 Capesize and Newcastlemax vessels with a $4.1 billion contracted revenue backlog. Combined with €1.3 billion of liquidity, this positions us to continue pursuing accretive opportunities as they arise. Resolution of the conflicts in The Gulf and Ukraine should bring meaningful stability for years to come.

Absent new initiatives by the major global powers. Last year's developments demonstrated that globalization remains resilient and that protectionism is likely to be the exception rather than the rule going forward. Trade is becoming increasingly multilateral which benefits the midsized containership segment in which we are actively investing. Together with a disciplined expansion strategy, we believe these dynamics will continue to drive improving profitability and create value for our shareholders. With that, I hand the call back over to Evangelos, who will take you through the financials for the quarter. Evangelos?

Evangelos Chatzis: Thank you, John, and good morning again to everyone. I will briefly review the results for the quarter and then open the call to Q&A. We are reporting adjusted EPS for this quarter of $6.72 per share or net income of 122.5 million compared to adjusted EPS of $6.00 $4 per share or adjusted net income of 113.4 million in the corresponding 2025.

This €9.1 million increase in adjusted net income between the 2 quarters is a combined result of a €0.4 million increase in operating revenues a €4.4 million improvement in total operating expenses a €2.4 million improvement in net finance expenses combined with a €2 million increase in dividend income partially offset by a €0.1 million increase in loss on equity investments. Operating revenues of our containership fleet decreased by 6.6 million as a result of the €6.9 million decrease in business due to lower contracted charter rates and the 7.2 million decrease due to lower non cash U.S.

GAAP revenue recognition accounting and these were partially offset by a $3.9 million increase in revenues as a result of newbuild containership vessel additions, and $3.6 million of incremental revenues as a result of improved container fleet utilization, between the 2 quarters. Operating revenues of our drybulk fleet that is deployed in the spot market increased by $7 million primarily due to a significant improvement in key time charter equivalent earnings that averaged $24.8 thousand per day during this quarter compared to $10.5 thousand approximately per day for the 2025.

Vessel operating expenses dropped by $1.7 million to $50 million in the current quarter from $51.7 million in the 2025 despite the increase in the average number of vessels in our fleet. This improvement was mainly driven by lower repairs and maintenance expenses with our daily operating costs declining to $6.68 thousand per vessel per day for this quarter compared to $7.03 thousand per vessel per day in the 2025. Our operating costs continue to remain among the most competitive in the industry. G and A expenses increased by 2.4 million to $14.6 million in the current quarter compared to 12.2 million in the corresponding 2025.

This is mainly attributable to $1.3 million in higher management fees driven by the increase in the average number of vessels in our fleet as well as a €1.1 million increase in corporate G and A. Interest expense excluding finance costs and debt, finance cost amortization increased by 1.7 million to $10.9 million in the current quarter compared to $9 million in the first quarter of last year.

This increase is a combined result of a $4.5 million increase in interest expense due to higher average indebtedness between the 2 periods by $330 million and that was partially offset by a reduction in the cost of debt service by approximately 50 basis points mainly as a result of reduced software rates. We also have 2.8 million reduction in interest expense due to higher capitalized interest on vessels under construction between the 2 periods. At the same time, interest income came in at 7.6 million versus $3.6 million in the corresponding 2025 mainly due to higher average cash balances.

Adjusted EBITDA increased by 5.2% or by $8.9 million to $180.6 million in the current quarter from $171.7 million in the 2025 for the reasons that have already been outlined earlier on this call. We also encourage you to review our updated investor presentation that is posted on our website as well as all subsequent events disclosures. Since the date of our last earnings release, we have added $120 million to our contracted revenue backlog As a result, our contract revenue backlog for our containership fleet now stands at 4.1 billion with a 4.2-year average charter duration. Contract coverage stands at 100% for this year or the remainder of this year 88% for 2027 and 65% for 2028.

Our investor presentation has analytical disclosure on our contract charter book. As of 03/31/2026, our net debt stood at 170 million that translates to a net debt to adjusted EBITDA ratio of 0.2x while 67 out of our 86 vessels are unencumbered and debt free while an extra 12 unencumbered vessels that secure our revolving credit facility are also debt free. We have declared a dividend of $0.90 per share for this quarter and we currently have $65 million remaining authority to repurchase stock under our $300 million share repurchase program.

Finally, as of the end of the 2026, cash stood at 900 million while total liquidity, including availability under our revolving credit facility and marketable securities, stood at €1.3 billion giving us ample flexibility to pursue accretive capital deployment opportunities. With that, I would like to thank you for listening to this first part of our call. Operator, we are now ready to open the call to Q&A.

Operator: Thank you. We will now begin the question-and-answer session. You may press *1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, At this time, we will pause momentarily to assemble our roster. Our first question comes from Omar Nokta with Clarksons.Please go ahead.

Analyst (Omar Nokta): Thank you. Hi, John and Evangelos. Good afternoon. I have a couple of things. I am Welcome back. Thank you, sir. Thank you. Just a couple things on my side. Just wanted to ask about investments from here. Your last couple of investments outside of your core focus seem to be in LNG both in, you know, the--in the stake in ZIM, You also invested in the Alaska LNG project. Earlier this year. Is this a concerted effort on your part to get a bit deeper into LNG Should we be expecting more of this type of investment going forward?

John Coustas: Yes. I think the in general, the energy sector is, let's say, our next point of focus. And as we see geopolitically, there are a lot of changes in that area. So we are following it very closely, and we try to address it from every angle. Both from the angle of transportation and also from the angle of LNG production itself, which is going to give us an access to the transportation as well.

Analyst (Omar Nokta): Okay. Okay. Got it. that is helpful. Thank you. And then just maybe in terms of what we are seeing in the container shipping market, your revenue backlog is at $4.1 billion which is obviously very strong. Historically, It is a little bit down from where you were last quarter, which I think $4.3. In general, you know, it looks like backlog additions maybe have been a bit leaner, this, these past couple of months, even though we are seeing indexes for the time charter index is being at all time highs or near all time highs. What are you seeing kind of at the moment in terms of liner interest for more starter coverage? From here?

John Coustas: From what you see from the profile practically all of 2026 and 2027 are almost fixed. We have very, very little going forward. Now also for liner companies, to start discussing from now about 2028 let's say ships might be a bit premature, especially for secondhand. So I do not think really it signifies anything else apart from that we have been really fixing quite a lot in this period of time. And it is just circumstantial.

Analyst (Omar Nokta): Okay. That certainly makes sense. Just not a nothing's available to be booked in the next several quarters. Okay. And maybe just 1 final 1. Thoughts on the share buyback, you have obviously historically been quite active on that front. You bought a bit during the first quarter, not at the same pace we have seen, at least in the fourth quarter. And I guess that sort of makes sense given the shares have really been hitting 52-week highs seemingly every week. How are you thinking about the buyback from here? I guess in the context of maybe 2 things. 1, the shares are obviously at their highs. Do you think about the buyback from that perspective?

But then also from the perspective of asset value on NAV basis, it is discounted then perhaps on a free cash flow yield, the yield is quite high. So how are you thinking about those 2 things with respect to the buyback?

Evangelos Chatzis: Well, still have the authority for another 65 million We are keeping closely. I mean, the stock has done a terrific run the last few months. We are at a kind of all-time high And so although we still believe that the stock is deeply undervalued. We are kind of more cautious about continuing during this hype. To continue the buyback.

Analyst (Omar Nokta): Okay. that is fair. Cool. Well, thank you for that color, John. Evangelos. I will pass it back.

John Coustas: Thank you.

Operator: Thank you. Our next question comes from Clement Molins with Value Investor's Edge. Please go ahead.

Analyst (Clement Molins): Hi, good afternoon and thank you for taking my questions. Omar has already covered a lot of ground, but I wanted to ask about the utilization on the Capesize side of the fleet. Could you talk a bit about the drivers behind the significant scheduled off-hire for the quarter? Was it mostly dry dockings? And secondly, could you remind us about the dry-docking schedule on the side of the fleet for the remainder of the year?

Evangelos Chatzis: Yes. It was 2 vessels that were to dry-dock. In Q1. And I do not have it offhand, but I do not think we have any more scheduled vessels on the dry side to have to--for the remainder of this year.

Analyst (Clement Molins): Okay. that is helpful. And all the off hire days were attributable to these 2 vessels?

Evangelos Chatzis: Sorry, say again?

Analyst (Clement Molins): I was asking if all the off hire days in Q1 were attributable to the dry-docking you conducted?

Evangelos Chatzis: Yes, correct.

Analyst (Clement Molins): Okay. Okay. that is very helpful. Thank you. I will turn it over. Thank you for taking my questions.

Operator: Thank you. As a re-press, we have no further question at this time. I would like to turn the call back over to Dr. Coustas for any further comments or closing remarks.

John Coustas: Thank you all for joining this conference call and your continued interest in our story. We look forward to hosting you on our next earnings call. Have a nice day.

Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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